It's Time for MLB's Billionaires to Embrace a Revenue-Sharing System With More Equity In It

With the next round of labor negotiations hanging over MLB and its players like the sword of Selig, the possibility (or lack thereof) of a salary cap and floor system for the sport has become a hot topic lately. As ever, the MLB Players Association views that structure as a non-starter, while a significant bloc of team owners view it as the best way forward. Whether or not there's a work stoppage that makes the winter of 2026-27 a horrible, echoing silence (or even steals games from the 2027 slate) depends somewhat heavily on how hard teams push to achieve a cap.

Since that system is unlikely to come to fruition, though, the likely redress for the owners' concerns about costs and the union's concerns about teams not spending enough is reform of the revenue-sharing system already in place. That system is not working for anyone, right now, for a very simple reason: it's effectively a regressive income tax.

Many fans are surprised when they learn that teams already pool 48% of their net local revenues, including gate receipts, local TV rights fees, and more. That sounds like a lot, and upon hearing it, the impulse is to assume that no more sharing is needed.

Maybe the sheer size of the pool is sufficient, but reform is urgently necessary. Right now, using a three-year blended average of revenues, teams all owe 48% of what they make through eligible revenue streams, and then get back 1/30th of the money pooled that way. In practice, of course, it works differently than that. Based on revenue reports and projections, some teams make an estimated quarterly payment of what they'll owe (taking away what they would receive from the amount they pay), while others never make a payment but only receive the difference between their share of the pool and the amount they would have owed from their own revenue. In effect, though, everyone keeps 52% of what they make, and gets a dividend worth about 3% of all 30 teams' other 48% (less some money held by the central league office).

Let's use some imaginary figures (but ones that certainly bear some strong relationship to reality) to explore the effect of that revenue-sharing plan. Say that:

• The Dodgers make $600 million in net local revenue;
• The Braves make $450 million; and
• The Brewers make $225 million.

Under the current system, all three teams owe 48% of that sum to the league's pool. The Dodgers, then, would pay in $288 million; Atlanta would pay $216 million; and the Brewers would cough up $108 million. Even after taking out the money set aside for the Commissioner's Discretionary Fund and some to cover player benefits, though, each team's share of the resulting pool is somewhere around $160 million. So, the Dodgers would actually pay in $128 million; Atlanta would pay $56 million; and the Crew would receive $52 million. Again, these figures are all hypothetical, but you see the mechanisms at work.

The problem with this system is that the Dodgers kept $312 million as their non-shared segment of the pool, and then another $160 million that they would have been due when the pool was disbursed again. Atlanta kept $234 million, plus $160 million. Milwaukee, meanwhile, only receives $52 million via revenue-sharing. So, the three teams end up with the following amounts of local revenue with which to work, after revenue sharing "levels the playing field":

• Dodgers: $472 million
• Atlanta: $394 million
• Brewers: $277 million

Now, each team also has a huge amount of other money flowing in, mostly from national TV revenues—but also from any real estate or other investments attached to the product but not technically shareable under the rules. Add a flat $100 million or more to each of those numbers, and the percentage represented by the gap between each shrinks. Still, does this system give the Brewers any realistic way to compete with the Dodgers, financially? Of course not. That's because, even though the Dodgers are well over twice as rich as they are, the two teams pay the same (they won't call it this, but that's what it is) income tax to the league, on a rate basis. The gap doesn't close nearly enough.

The system needs a more progressive approach. In this negotiation, neither side wants to put any constraints on revenue or disincentivize earning, but a modest increase in the tax rate for the teams who make the most money wouldn't do that.

What if, instead of a flat 48%, the revenue-sharing rate was 40% for teams in the lower third of the league; 48% for the middle third; and 56% for the top third? In that altered situation, the three teams in our example would end up with very different amounts of revenue when the redistributions were complete. The league would collect more, and thus dole out more, and a larger share of that money would have come from the richest clubs in the league, to begin with.

In that scenario, these three teams might end up keeping:

• Dodgers: $444 million
• Atlanta: $414 million
• Brewers: $315 million

The gap still isn't closed, there, but it's much smaller. It's more plausible that a small-market team can keep its franchise player, and build a winner around them even as they enter their 30s. It's more likely that an owner will decide to flex their budget a bit and chase a championship. There would be messy bits to this, like teams jockeying to be on the right side of dividing lines between tiers, but this is one way for revenue sharing to do a much better job of addressing the massive inequalities in the modern game.

Big-market teams would howl at this, of course. There would need to be other concessions—perhaps, much to the union's potential delight, a slackening of penalties on spending beyond the competitive-balance tax threshold, or fewer advantages for small-market teams in the draft and in free-agent compensation—to mollify them. Both small- and medium-market teams would benefit, though, and the whole league would become more invested in the earning power of everyone else in the league. It could be the best way to avoid a sport-shattering work stoppage, and to make it easier for David to compete with Goliath.